Section 38 of the Highways Act 1980 is the means by which highway authorities normally adopt a road. This is facilitated through a Section 38 Agreement. A developer normally builds the road to a pre-agreed standard and has the road inspected at various stages of construction. At the appropriate time, the road is adopted and becomes a public highway and after that adoption date, it is maintainable at the public expense.
A case involving Knowsley Metropolitan Borough Council and Redrow Homes was concerned with a Section 38 Agreement where the Council required the developer to pay a commuted sum of £39,000 towards the future maintenance of street lighting after adoption of the road.
The developer took the view that it was not liable to pay the commuted sum because the road, as at the date of the adoption, had become maintainable at the public expense. Accordingly, no further payment should be made by the developer to fund maintenance of that adopted highway.
It was further suggested that if the payment of £39,000 was deemed lawful, there would be difficulties in distinguishing when liability for a road ceased - the traditional view being that once the road is adopted, total responsibility transfers to the local authority. If commuted sums were chargeable and lawful it would change that situation.
Section 38(6) of the Highways Act 1998 provides that a local authority can include "any other relevant matters" that they see fit in a Section 38 Agreement. The Court, having considered the matter, stated that it was not necessarily inconsistent with the statutory concept of the highway being maintainable at public expense for there to be a provision requiring private expenditure after the date of the adoption.
The Court took the view that if Parliament wanted to limit the rights of the local authority, they would have expressly provided for this within Section 38 of the Highways Act 1980. Leave to appeal the decision to the Court of Appeal was refused and accordingly the payment of commuted sums is considered lawful in the context of the Section 38 Agreement.
In light of this decision the best advice to Developers/Landowners is to avoid the inclusion of commuted sums in a Section 38 Agreement, minimising the risk of further financial exposure, until the matter may be ultimately clarified by an amendment to the Act, or the Court of Appeal.